PRIME LOCATIONS - JSE MAGAZINE

PRIME LOCATIONS

Echo Polska Properties is a leading real estate investment company operating in a REIT formula with the potential to double in size in coming years

Currently, Echo Polska Properties (EPP) has 10 office properties and 11 retail properties with a gross leasable area (GLA) totalling 636 170 m2 in major cities across Poland, the largest economy in Central Europe. Added to this is our 25% development profit participation in and the right of first offer from Echo Investment to purchase another three properties (known as ROFO projects), with a total GLA of about 200 000 m2.

The ROFO projects are at various stages of construction and set to be completed between 2016 and 2018.

In addition to the organic growth of our property portfolio, significant growth opportunities are embedded by virtue of extensions, reduction in vacancy rates and arrangements regarding the ROFO projects. Shareholders stand to benefit from the returns that will emanate from high-quality, modern and sizeable properties in our portfolio.

We are backed by an experienced board and staff complement, which continues to drive our development into one of the largest investment companies in Poland.

We also have the strategic benefit of long-term investors with a wealth of real estate experience and proven track records in Redefine Properties (one of the largest real estate investment trusts in SA) and Echo Investment (a recognised market leader in the Polish commercial and residential property development space).

In an interview with Property EU, the CEO of Echo Polska Properties, Hadley Dean, describes how the business is going to develop in Poland and explains its strategic objectives.

The EPP portfolio of 11 shopping centres and 10 office buildings was created by spinning off the yielding assets and the property management business from the existing development business, Echo Investment. ‘EPP aims to build this portfolio into a business, which becomes a Polish national champion,’ says Dean.

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EPP is dually listed on the LuxSE (as of August 2016) and the JSE (September 2016). The purpose of becoming a publicly listed company was raising a further €100 million to purchase four office buildings and buy a controlling interest in a retail development in the CBD of Warsaw, Poland which will add a further €200 million to EPP’s portfolio.

‘Within months we will have a portfolio of €1.5 billion. We are targeting €2.5 billion in the coming years,’ says Dean.

The focus is on prime properties in good locations, he adds. ‘Echo Investment has built 120 properties in Poland over the past 20 years and kept its trophy assets. We are fortunate to own assets of such quality.’ 

Return profile
The new company is targeting double-digit growth while offering a forward yield of 7.5% in 2017, says Dean. ‘We will achieve this firstly by the built-in growth through retail expansions of existing shopping centres, ROFO and active management and secondly through strategic retail acquisitions to strengthen our national presence.’ 

The focus will remain exclusively on Poland, according to Dean. ‘The company’s shareholders are well respected and our deal flow in Poland is better than in other European countries. Poland is a Western European country but still priced at CEE levels and we believe we have more than enough opportunity in Poland.’ 

Former Polish Prime Minister and governor of the national bank of Poland Marek Belka is on the company’s supervisory board. ‘We are honoured Prof Belka is a board member as he brings a wealth of knowledge and experience to the board,’ says Dean.

Polish market
Poland is well placed to weather the storm of any future market volatility, with opportunities for inexpensive space being a positive outcome flowing from Brexit, says Dean.

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‘Big banks are actively seeking more space for their back offices, so Poland is set to benefit by Brexit as financial institutions are looking to snap up office space that is almost 60% cheaper than in London. Moreover, they stand to benefit from the large educated work force and lower human resources costs.’

Poland is the best country in the region for real estate investment, he says. ‘Poland is priced like Central Europe but in many ways it is just as developed as Western Europe. That’s a big difference with other countries in the region. If you look at Berlin, London and Warsaw, Warsaw feels like any other Western European capital.’

There is currently very little Polish pension fund money in property but things are starting to change, according to Dean. ‘It is starting and we will see more of it. We’ve already had a few players knocking on the door.’

About the company
Registered in the Netherlands in January 2016, EPP was created on the basis of Polish cash-generating commercial projects built and held by Echo Investment. Listed on the Warsaw Stock Exchange, the developer company is controlled by a consortium of the most active real estate investors in Central and Eastern Europe, Griffin Real Estate, together with Oaktree and PIMCO funds.

On 1 June 2016, Redefine Properties – an SA REIT headquartered in Johannesburg – acquired a 75% stake in EPP’s issued ordinary share capital, subsequently reducing its shareholding to just under 50% through the on-sale of EPP ordinary shares to a consortium of selected co-investors. The stake of 21.93% is still held by Echo Investment subsidiary.

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Registered office:
Prins Bernhardplein 200, 1097 JB Amsterdam, Holandia
Polish office:
ul. Konstruktorska 12, 02-673 Warszawa, Polska
Tel. +48 22 43 00 300
Email: [email protected]